Investment Pitches

Pitch Summary:
A good example is Columbus McKinnon Corp. (CMCO), which we initially added to our Strategy in the fourth quarter. The company designs, manufactures, and distributes materials, handling products, and systems used in a variety of industrial applications, including lifting, precision conveyance, and linear motion. Historically, CMCO's growth has been largely driven by changes in manufacturing activity. A new CEO joined the business in June 2020 with the goal of higher growth and margin applications while increasing the recurring revenue mix. CMCO, however, reported a softer recent quarter due to slowing industrial demand driven by U.S. policy uncertainty. The company also announced a $2.7 billion acquisition of competitor Kito Crosby, which sent the stock plummeting 41% due to uncertainty around execution and an increased leverage profile of 4.8x upon closing. We believe Columbus McKinnon offers investors a compelling risk/reward case and a strong catalyst as it seeks to reduce leverage and improve the growth and margin profile of the consolidated business. Management, which has been aggressively purchasing the stock in the open market during the recent sell-off, is targeting mid-20% EBITDA margins upon integration. That's up from an estimated 15.5% in FY25 pre-acquisition. At the end of the quarter, the stock was trading at about $17 a share. Our current target price target of $54 would imply a valuation of 10.5 times Enterprise Value to EBITDA. Upon execution of the acquisition, however, we believe CMCO should be treated similarly to its industrial peers trading an at average of 12x EV/EBITDA.

BSD Analysis:
Heartland presents a compelling turnaround thesis for Columbus McKinnon following a major acquisition-driven selloff. The fund views the 41% stock decline after the $2.7 billion Kito Crosby acquisition as an overreaction, creating an attractive entry point at $17 per share. Management's aggressive insider buying during the selloff validates the investment thesis and demonstrates confidence in execution. The acquisition is expected to drive significant margin expansion from 15.5% to mid-20% EBITDA margins upon integration, representing substantial operational leverage. With a leverage profile of 4.8x upon closing, deleveraging becomes a key catalyst for multiple expansion. The $54 target price implies 10.5x EV/EBITDA, which appears conservative relative to industrial peers trading at 12x multiples. The new CEO's strategic focus on higher-margin applications and recurring revenue mix should drive sustainable growth beyond the acquisition benefits.

Pitch Summary:
Cogent's share price was impacted following a couple of quarters of missing earnings, as investors lost patience with the length of time the Sprint wireline integration was taking. Although management has already captured the targeted $220m of cost savings, the integration work is still consuming time and operating expenses, and revenue has yet to inflect, leaving headline results soft and sentiment poor. Behind the noise, the wavelength build-out is gathering momentum. The funnel now sits at 3,433 orders. Importantly, Cogent can activate new wavelength circuits in as little as two weeks, versus the three-to-nine-month lead times typical of Lumen, Zayo, and others, a speed advantage that should translate into share gains as the backlog converts. Cogent aims to ramp up to a sustained pace of approximately 500 installations per month by year-end. Wavelength ARPU is roughly $1,930, with incremental EBITDA margins of over 90%, thanks to minimal variable costs, implying a potential run-rate incremental cash flow of over $100 million within a year. If those installations and associated cash flow fail to materialize over the next quarter or two, I will exit the position. However, for now, the market's focus on near-term integration headaches leaves ample upside once wave scale.

BSD Analysis:
The manager presents a contrarian bull case for Cogent Communications, acknowledging near-term execution challenges while highlighting significant underlying business momentum. The Sprint wireline integration has taken longer than expected, consuming management time and operating expenses despite achieving the targeted $220 million in cost savings, leading to soft headline results and poor investor sentiment. However, the wavelength business is showing strong progress with 3,433 orders in the funnel and a significant competitive advantage in activation speed—two weeks versus 3-9 months for competitors like Lumen and Zayo. This speed advantage should drive market share gains as the substantial backlog converts to revenue. Management targets 500 installations per month by year-end, with wavelength ARPU of approximately $1,930 and incremental EBITDA margins exceeding 90% due to minimal variable costs. The economics are compelling, with potential run-rate incremental cash flow exceeding $100 million annually once at scale. The manager acknowledges execution risk and has set a clear timeline for progress, stating he will exit if installations don't materialize within the next quarter or two. The investment thesis relies on the market's myopic focus on integration issues creating an opportunity as the high-margin wavelength business scales.

Pitch Summary:
Amazon's structural edge keeps widening. Its high-return, capital-light businesses compound without depending on the retail cycle. AWS is growing at mid-teens rates with nearly 40% segment margins and now contributes more than half of the group's operating income. Advertising, an asset-light adjunct to the marketplace, is expanding even faster at 19% and directly impacts the bottom line. Meanwhile, the core retail business continues to benefit from the regionalized fulfilment network built over the last two years. North American retail margins would have reached roughly 7% absent tariff-related charges. Amazon generated approximately $25 billion of trailing free cash flow, more than enough to cover stepped-up investments in artificial intelligence and robotics, while also funding Project Kuiper, whose first production satellites launched in April and can extend AWS into connectivity white spots around the world. I view Amazon as a self-funded, multi-legged compounding machine that trades at what appears to be a mid-teen multiple of normalized free cash flow.

BSD Analysis:
The manager presents a strong bull thesis for Amazon emphasizing the company's diversified, high-return business model with multiple compounding growth drivers. AWS continues to be the primary profit engine, growing at mid-teens rates with nearly 40% segment margins while contributing over half of total operating income. The advertising business represents another high-margin, asset-light revenue stream expanding at 19% annually with direct bottom-line impact. The core retail business has benefited significantly from the regionalized fulfillment network investments, with North American retail margins approaching 7% excluding tariff impacts. Amazon's financial strength is evident in its $25 billion trailing free cash flow generation, providing ample self-funding capacity for strategic investments in AI, robotics, and Project Kuiper satellite constellation. Project Kuiper's first production satellites launched in April, potentially extending AWS's reach into underserved connectivity markets globally. The manager views Amazon as a "multi-legged compounding machine" that appears attractively valued at a mid-teen multiple of normalized free cash flow. The combination of high-return, capital-light businesses (AWS and advertising) with the improving retail margins creates a compelling investment profile with multiple avenues for continued growth and margin expansion.

Pitch Summary:
Kingsway's shares spent most of the past year moving sideways, which is unsurprising for a roughly $400 million market cap company that receives little sell-side coverage and whose value depends more on future acquisition-driven growth than on reported earnings today. Execution across the portfolio has been uneven. Acquisitions such as Ravix and SPI have performed well, while CSuite has proven difficult, and Secure Nursing has faced soft demand for travel nurses and wage pressure, resulting in revenue remaining flat and margins under strain as the industry normalizes following the pandemic. At the May Investor Day, management reaffirmed its goal of two to three acquisitions a year at 5-7x EBITDA on companies earning $1.5 - $3 million and walked through an operating playbook for their most recent acquisition Buds Plumbing that showed how pricing, service mix expansion, and bolt-on M&A can double profits within three years. Two weeks later, Kingsway closed a $15.7 million PIPE at $11.75 per share, lifting its acquisition cadence target to three to five deals per year. The share price has run up on that news and could be volatile until the playbook is proven; but if management executes on a handful of high quality acquisitions a year and brings solid operational discipline to formerly lifestyle family businesses, the earnings base could expand meaningfully over the next few years.

BSD Analysis:
The manager presents a cautiously optimistic bull case for Kingsway Financial Services, acknowledging both the execution risks and potential upside from the company's acquisition-driven growth strategy. As a $400 million market cap company with limited sell-side coverage, Kingsway's value proposition depends heavily on successful M&A execution rather than current earnings. The track record shows mixed results with successful acquisitions like Ravix and SPI offset by challenges at CSuite and Secure Nursing, where post-pandemic normalization has pressured margins. Management's acquisition strategy targets companies earning $1.5-$3 million EBITDA at 5-7x multiples, with an operational playbook demonstrated through Buds Plumbing showing potential to double profits within three years through pricing optimization, service expansion, and bolt-on acquisitions. The recent $15.7 million PIPE financing at $11.75 per share has increased the acquisition target from 2-3 deals annually to 3-5 deals, providing more capital for growth. The manager acknowledges near-term volatility risk until the playbook is proven but sees meaningful earnings expansion potential if management successfully applies operational discipline to lifestyle family businesses. The investment thesis hinges on execution of the acquisition strategy and operational improvements across the portfolio.

Pitch Summary:
We started a position in NVIDIA (NVDA) following a significant pullback in the stock. The decline was prompted by concerns stemming from the emergence of DeepSeek, an unknown Chinese AI software company, which unveiled a highly efficient large language model (LLM). DeepSeek's breakthrough raised investor fears that U.S. hyperscalers might reduce their capital expenditure plans due to a shift toward more resource-efficient AI models. This led to concerns over potential overcapacity in the AI infrastructure market, weighing heavily on NVDA's stock. As a result, NVDA shares declined nearly 30% from recent highs, presenting an attractive entry point. On our cost basis, NVDA was trading at approximately 25x expected 2025 earnings and 20x expected 2026 earnings, valuations we found compelling for a company projected to grow revenue and earnings by over 50% in calendar year 2025. We viewed this risk-reward profile as favorable, especially given NVIDIA's dominant position in powering the transition to accelerated computing architecture that powers the AI ecosystem. The AI market is still in its preliminary stages, characterized by fast-paced innovation, and evolving rapidly. While DeepSeek's advancement sparked a debate around capital efficiency, we believe it reinforces a broader trend we have seen in past technology cycles. Specifically, we view Jevons' paradox, where gains in efficiency lead to increased overall consumption, as highly relevant to AI. Supporting this view, U.S. hyperscalers increased their 2025 capital expenditure guidance during Q4 2024 earnings calls in January, despite being fully aware of DeepSeek's progress. Further, the integration of reasoning capabilities into leading LLMs, such as those used in ChatGPT, is significantly increasing computing intensity. Some experts estimate that inferencing models with reasoning can demand up to one hundred times more computing, reinforcing the idea that greater efficiency will not lessen, but rather increase, demand for NVIDIA's infrastructure. We are still mindful of the rapid evolution within the AI space from the emergence of more efficient models to the still-nascent monetization of AI software. Against this backdrop, we chose to start a focused position in NVDA while reducing exposure to other AI-related holdings such as Broadcom, Amphenol, and Oracle. In our view, NVIDIA offers an attractive way to take part in the generative AI buildout, combining scale, technological leadership, and a healthy growth outlook.

BSD Analysis:
Mar Vista initiated a position in NVIDIA following a 30% decline, viewing the DeepSeek-driven selloff as an attractive entry opportunity. The fund acquired shares at compelling valuations of 25x 2025 earnings and 20x 2026 earnings for a company expected to grow revenue and earnings over 50% in 2025. Mar Vista applies Jevons' paradox to AI, arguing that efficiency gains will increase rather than decrease overall computing demand. The integration of reasoning capabilities into large language models could require 100x more computing power, supporting continued infrastructure demand. Hyperscalers' increased 2025 capex guidance despite DeepSeek awareness validates this thesis. NVIDIA's dominant position in accelerated computing architecture provides sustainable competitive advantages in the AI ecosystem transition. The company's technological leadership, scale advantages, and comprehensive software stack create high switching costs for customers. Mar Vista views the AI market as still in preliminary stages with rapid innovation ahead. The focused position approach while trimming other AI holdings demonstrates conviction in NVIDIA's superior risk-reward profile. The fund sees NVIDIA as the best way to participate in generative AI buildout given its market leadership and growth outlook.

Pitch Summary:
Apple's stock came under pressure in Q1 due to concerns of softening iPhone demand; increased competition from Huawei in China; challenges with the rollout of Apple Intelligence, its new AI offering for the iPhone; and potential tariff-related headwinds. Despite these near-term challenges, we continue to view Apple as competitively advantaged, supported by the strength of its ecosystem, which includes a loyal customer base encompassing over 2 billion active devices and more than 1 billion paying subscribers. This ecosystem generates recurring service revenue and supports a stable cash flow stream, which enables Apple to invest in product development during cyclical slowdowns like its recent experience with soft iPhone sales. We believe these cyclical headwinds are transitory, and Apple is well-positioned to emerge from this period of softer iPhone demand as a leader in AI-enabled edge devices.

BSD Analysis:
Mar Vista maintains conviction in Apple despite near-term headwinds from iPhone demand softness, Chinese competition, and AI rollout challenges. The fund emphasizes Apple's ecosystem strength as a sustainable competitive advantage, with over 2 billion active devices and 1 billion paying subscribers creating powerful network effects. The recurring services revenue provides cash flow stability during hardware cycles, enabling continued R&D investment in next-generation products. Apple's loyal customer base demonstrates low switching costs and high lifetime value, supporting premium pricing power. The company's financial strength allows strategic investments during cyclical downturns, positioning it for the next growth phase. Mar Vista views current challenges as transitory rather than structural, with Apple well-positioned to lead the AI-enabled edge device market. The integration of Apple Intelligence across the device ecosystem could drive the next upgrade cycle. China competition from Huawei appears manageable given Apple's brand strength and ecosystem lock-in. The services business provides margin expansion opportunities and reduces hardware cyclicality over time.

Pitch Summary:
KKR's share price fell earlier this year after tariff headlines and worries about a tougher market for private equity realizations, the exits that turn paper gains into cash and carried interest, before rebounding partly in Q2. While those concerns are real, the firm's strength is its resilient cash-flow engine. Most earnings come from what the company recently started to call "Total Operating Earnings," which are generally steadier than investment income and generate $4.5bn a year. Three elements drive this figure. First, steady management fees which are charged on committed or invested capital, not quarterly marks. Fee paying AUM grew 12 % year over year to $526bn, lifting fee related earnings 23 % to $823m at a 69 % margin. Second, insurance operating earnings: Global Atlantic manages nearly $200bn and earned $259m pre tax in the quarter, nearly a 20 % return on equity. Every new annuity brings both an investment-management fee and a balance-sheet spread, creating a stable, self-funded growth flywheel. Third, strategic holdings, core companies KKR plans to own long term, now contribute $90m, with a line of sight to $300m and eventually $1bn. As regards investment income, $116bn of uncalled commitments, $245bn of carry-eligible assets already marked above cost, and an $800m monetization pipeline give visibility on future fees and carry, supporting KKR's ability to compound regardless of where the fundraising cycle sits in the near term.

BSD Analysis:
The manager presents a compelling bull case for KKR focused on the firm's resilient earnings diversification beyond traditional private equity realizations. Despite near-term headwinds from tariff concerns and private equity exit market challenges, KKR's "Total Operating Earnings" of $4.5 billion annually provide stability through three key revenue streams. Management fees on $526 billion of fee-paying AUM grew 12% year-over-year, generating $823 million at impressive 69% margins based on committed capital rather than volatile quarterly marks. The Global Atlantic insurance platform manages nearly $200 billion in assets with $259 million in quarterly pre-tax earnings, achieving nearly 20% ROE while creating a self-funded growth flywheel through annuity sales. Strategic holdings contribute $90 million currently with visibility to $300 million and eventually $1 billion, providing another stable income source. The firm maintains substantial dry powder with $116 billion in uncalled commitments and $245 billion in carry-eligible assets marked above cost, supporting future fee and carry generation. An $800 million monetization pipeline provides near-term visibility on realizations. The manager emphasizes KKR's ability to compound earnings regardless of fundraising cycles, making it less dependent on market timing than traditional private equity models.

Pitch Summary:
The Brookfield machine kept humming in the quarter. Distributable earnings climbed 27 % to $1.55bn. Fee related earnings hit a record $698m at a 57 % margin, while fee bearing capital reached $549bn. Management closed two new $16bn flagship funds and raised roughly $25bn of total commitments, further enlarging the base of steady, compounding fees that do not depend on exit markets. Brookfield also agreed to buy a majority stake in Angel Oak, an $18bn mortgage credit platform that will seed a new lending strategy. Insurance and operating platforms continue to extend Brookfield's runway. Insurance generated $430m of earnings on $133bn of assets, backed by $4bn of new annuity sales and a 5.7 % portfolio yield that sits 180 bp above the cost of funds. Looking beyond the quarter, Bruce Flatt recently re-emphasized the three structural tailwinds Brookfield is leaning into, digitization, decarbonization, and deglobalization. Many of the investable assets tied to these themes did not exist at scale two decades ago, yet they now represent expanding opportunity sets that play directly to Brookfield's strengths. Critics often seize on the firm's complexity, a trait that can attract the occasional short-seller attack, but Mr. Flatt maintains the same architecture lets management shift capital among listed partnerships, private funds, and the insurance balance sheet wherever risk-adjusted returns look best and wherever the market is willing to ascribe value (such as with high multiples for asset-light managers). That flexibility has helped Brookfield compound capital at roughly 19 % annually over the past 30 years.

BSD Analysis:
The manager presents a strong bull thesis for Brookfield Corporation, emphasizing the company's diversified asset management platform and exceptional long-term track record. Distributable earnings grew 27% to $1.55 billion with fee-related earnings reaching a record $698 million at impressive 57% margins. The company's fee-bearing capital base of $549 billion provides substantial recurring revenue streams that are less dependent on volatile exit markets. Recent fundraising success includes two new $16 billion flagship funds and $25 billion in total commitments, demonstrating strong investor demand. The Angel Oak acquisition adds an $18 billion mortgage credit platform, expanding Brookfield's lending capabilities. The insurance platform generated $430 million in earnings on $133 billion of assets with a compelling 180 basis point spread over funding costs. Management has identified three key structural tailwinds: digitization, decarbonization, and deglobalization, representing expanding investment opportunities that align with Brookfield's core competencies. While critics point to the firm's complexity, the manager views this as a competitive advantage that allows flexible capital allocation across multiple platforms to optimize risk-adjusted returns. The 19% annual capital compounding rate over 30 years validates this approach.

Pitch Summary:
Alphabet's stock, currently trading around $150, carries the lowest valuation among the "Magnificent Seven" at just 16.6 times this year's earnings—a below-market multiple that suggests deep investor skepticism. The concerns are well-documented: AI-powered competition threatening Google Search, an ongoing antitrust battle, and ballooning capital expenditures, expected to rise 40% to $75 billion this year. We think most of the fear may already be priced into the stock price. Google still dominates search, holding nearly 80% market share, particularly in high-value commercial queries that drive its core advertising business. While AI innovations like ChatGPT and Perplexity AI present potential challenges, Google's integration of AI into search could help it keep leadership. Operationally, Alphabet is more disciplined than the market believes. The company is improving efficiency, with operating margins rising four percentage points in 2024. The appointment of CFO Anat Ashkenazi signals further cost-conscious execution ahead. Beyond search, Alphabet offers a diversified tech portfolio. YouTube is still a digital media powerhouse, Google Cloud is scaling toward profitability with $50 billion in annual sales, and Waymo is a frontrunner in autonomous driving. Meanwhile, Android continues to power the global mobile ecosystem. At 18 times earnings, Alphabet trades at a meaningful discount to peers, despite its robust cash flow and dominant market positions. With AI threats overstated and cost controls improving, current valuation is compelling.

BSD Analysis:
Mar Vista presents a compelling contrarian case for Alphabet, emphasizing the disconnect between valuation and fundamental strength. Trading at 16.6x earnings, the stock represents the cheapest valuation among mega-cap technology companies despite maintaining dominant market positions. The 80% search market share, particularly in high-value commercial queries, provides sustainable competitive advantages and pricing power. Management's operational discipline is evident in the 400 basis point operating margin improvement in 2024, with new CFO Anat Ashkenazi likely to drive further efficiency gains. The diversified portfolio beyond search includes YouTube's media dominance, Google Cloud's $50 billion revenue run-rate approaching profitability, and Waymo's autonomous driving leadership. Android's mobile ecosystem control provides strategic leverage across multiple business lines. The 40% capital expenditure increase to $75 billion reflects necessary AI infrastructure investments rather than wasteful spending. AI competition concerns appear overblown given Google's integration capabilities and search moat durability. The valuation discount to peers creates an attractive risk-reward profile for patient investors.

Pitch Summary:
We keep a positive outlook on Broadcom shares, despite recent stock price pressure stemming from two key concerns: (1) uncertainty around potential tariffs and the impact on global growth, and (2) investor skepticism on the return profile of large-scale AI capex investments by hyperscalers. This skepticism has been amplified by the efficiency gains recently shown by DeepSeek, an unknown Chinese software company, which developed a competitive large language model at a much lower cost. These efficiency gains stoked fears that hyperscalers may have overbuilt AI infrastructure. Broadcom keeps a strong competitive position in the custom AI ASIC market, as well as a disciplined capital allocation, most recently reflected in the VMWare acquisition. That deal is already delivering better-than-expected top-line growth and margin expansion. Broadcom is the leading provider of custom AI ASICs and has been steadily diversifying its customer base beyond its first anchor client, Alphabet. Many hyperscalers are interested in developing custom ASICs, which are tailored to specific computing tasks, given their lower costs and attractive performance attributes compared to general-purpose GPUs from providers like NVIDIA. While we are still constructive on Broadcom's long-term prospects, we did trim our position earlier in the quarter at higher levels to reallocate capital toward a more favorable risk-reward opportunity. Nonetheless, Broadcom is still a core holding in our portfolio and offers an attractive margin of safety. We believe the company is well-positioned to grow intrinsic value by +20% over the intermediate term.

BSD Analysis:
Mar Vista maintains a bullish long-term view on Broadcom despite near-term headwinds from tariff uncertainty and AI infrastructure skepticism. The fund emphasizes Broadcom's dominant position in custom AI ASICs, which offer superior cost and performance characteristics compared to general-purpose GPUs. The VMware acquisition demonstrates management's disciplined capital allocation, already delivering above-expected revenue growth and margin expansion. Customer diversification beyond Alphabet reduces concentration risk while expanding market opportunities. The DeepSeek efficiency concerns appear overblown given hyperscalers' continued interest in custom silicon solutions. Broadcom's competitive moat in complex semiconductor design and manufacturing creates high switching costs for customers. The company's software transformation through VMware provides recurring revenue streams and higher margins. Mar Vista's +20% intrinsic value growth target over the intermediate term reflects confidence in the AI infrastructure buildout and Broadcom's market leadership. The position trimming at higher levels demonstrates disciplined portfolio management while maintaining core conviction.

Pitch Summary:
Fairfax's progress over the last three years has been a textbook exercise in compounding. Hard-market pricing from 2022 to 2024 enabled the group to expand net written premiums at a double-digit clip, increasing float to $33 billion, up roughly 12% per year since 2020. With that larger float invested in longer-duration bonds, interest and dividend income have climbed from $0.6 billion in 2021 to about $2.5 billion last year. Adding a steady $1bn+ of associate earnings and normalized underwriting profit, Fairfax is positioned to earn more than $165 per share in 2025, over triple the approximately $52 per-share run rate we underwrote in 2019. These four pillars, disciplined underwriting, growing float, higher fixed-income yields, and associate contributions, have driven the company's outperformance since 2022. The share price has adjusted accordingly: Fairfax now trades at around 1.7x stated book value, or 1.5x forward, rewarding us with both earnings growth and multiple expansion. The insurance hard market may be coming to an end, and even if premium growth slows to the 6% base-case forecast and the combined ratio drifts toward the high 90s, management still expects more than $1.5 billion in underwriting profit, in addition to the recurring income streams noted above. A substantial cash cushion and excess capital across the underwriting subsidiaries provide Fairfax with flexibility to continue repurchasing shares or reinvest opportunistically. While we should not expect the same pace of multiple expansion from here, the company's scalable earnings engine and conservative balance sheet leave ample room for attractive, though more measured, long-term returns.

BSD Analysis:
The manager presents a compelling bull case for Fairfax Financial based on exceptional operational execution and earnings transformation. The company has successfully leveraged the insurance hard market cycle from 2022-2024 to grow premiums at double-digit rates while expanding float to $33 billion. Most impressively, the combination of larger float invested in higher-yielding bonds has driven interest income from $0.6 billion to $2.5 billion annually. The manager highlights four key value drivers: disciplined underwriting, growing float, higher fixed-income yields, and associate earnings contributions. With earnings power expected to exceed $165 per share in 2025 versus $52 per share in 2019, the company has achieved remarkable operational leverage. Trading at 1.7x book value, the stock has benefited from both earnings growth and multiple expansion. Even as the hard market cycle potentially moderates, management expects over $1.5 billion in underwriting profit alongside recurring income streams. The manager acknowledges that future multiple expansion may be more limited but remains confident in the company's scalable earnings engine and balance sheet strength to generate attractive long-term returns.

Pitch Summary:
Johnson & Johnson (JNJ) appreciated 16% as the market favored businesses with more defensive characteristics. JNJ also posted strong fundamental results in pharmaceutical (+7% revenue growth) ahead of Stelera biogeneric approvals in January 2025. We expect JNJ to grow revenues 5-7% through 2030 with faster EPS growth driven by new innovative immunology, oncology, and neurology drugs. JNJ's MedTech franchise should outpace the growth of the rest of the industry on the strength of new products in electrophysiology, orthopedics, and robotics.

BSD Analysis:
Mar Vista views Johnson & Johnson as a defensive quality play with strong growth prospects across its diversified healthcare portfolio. The 16% quarterly appreciation reflects market rotation toward defensive characteristics amid economic uncertainty. The pharmaceutical segment's 7% revenue growth ahead of Stelera biosimilar competition demonstrates pricing power and pipeline strength. Management's revenue guidance of 5-7% through 2030 appears conservative given the robust innovation pipeline in high-growth therapeutic areas. The immunology, oncology, and neurology franchises represent significant growth drivers with substantial market opportunities. The MedTech division's focus on electrophysiology, orthopedics, and robotics positions it to outgrow industry peers through technological innovation. Johnson & Johnson's diversified revenue streams, strong balance sheet, and consistent dividend growth provide downside protection. The company's R&D investments and regulatory expertise create sustainable competitive advantages in pharmaceutical development.

Pitch Summary:
TransDigm continues to post robust fundamental performance despite increased economic uncertainty and difficult year-over-year comparisons. Revenue grew 12% with strong contributions from commercial aftermarket and defense. These two segments are expected to deliver high single digit growth for the rest of the fiscal year. EBITDA as adjusted reached 52.9%, an industry prominent level. Management expects more EBITDA margin growth of up to 40 basis points for the rest of the year. Moreover, management telegraphed a special dividend and more capital deployment in the commercial aftermarket segment, which has historically led to incremental growth and margin expansion in future periods.

BSD Analysis:
Mar Vista expresses strong confidence in TransDigm's execution despite challenging market conditions. The company delivered impressive 12% revenue growth driven by commercial aftermarket and defense segments, both expected to maintain high single-digit growth trajectories. The standout metric is the 52.9% adjusted EBITDA margin, which represents industry-leading profitability. Management's guidance for additional 40 basis points of margin expansion demonstrates operational leverage and pricing power. The announced special dividend and increased capital deployment in commercial aftermarket reflects strong cash generation and disciplined capital allocation. TransDigm's aftermarket focus provides recurring revenue streams with high switching costs. The company's strategy of acquiring niche aerospace components with limited competition creates sustainable competitive advantages. Management's track record of margin expansion through operational improvements and strategic acquisitions supports the bullish thesis.

Pitch Summary:
Visa's stock appreciated 11% as secular trends in electronic payments are still steady despite macroeconomic uncertainty. Revenues should grow faster than overall consumer spending as electronic network penetration, cross-border travel, and new services help the company's top line. Visa's "toll taker" status should allow the business to thrive even in inflationary environments. We expect Visa to compound intrinsic value at low-mid teen rates in a variety of economic scenarios.

BSD Analysis:
Mar Vista maintains a bullish stance on Visa, highlighting the company's resilient business model amid macroeconomic uncertainty. The fund emphasizes Visa's "toll taker" positioning, which provides defensive characteristics and pricing power during inflationary periods. The manager expects revenue growth to outpace consumer spending due to continued electronic payment penetration, cross-border travel recovery, and new service offerings. The secular shift toward digital payments provides a long-term tailwind for the business. Mar Vista projects intrinsic value compounding at low-to-mid teen rates across various economic scenarios. The 11% quarterly appreciation reflects market recognition of these defensive qualities. Visa's network effects and dominant market position in payment processing create a sustainable competitive moat.

Pitch Summary:
Microsoft (MSFT) reported strong bookings, highlighted by an accelerating remaining performance obligation of nearly $300 billion, representing 36% year-over-year growth, as well as healthy cloud revenue growth of 21% year-over-year. Despite this solid performance, MSFT stock came under pressure as Azure revenue growth, at 31% year-over-year, came in at the low end of expectations. Additionally, guidance for the March quarter forecasted Azure revenue growth of 31% to 32%, reflecting a slowdown in non-AI-related Azure growth. We continue to believe Microsoft is well-positioned to gain market share as organizations of all sizes pivot toward a digital-first future and adopt generative AI solutions. With a strong presence in the enterprise and a comprehensive portfolio spanning infrastructure-as-a-service (IaaS), platform-as-a-service (PaaS), and software-as-a-service (SaaS), Microsoft is a mission-critical IT provider across industries. The company is executing effectively against a significant market opportunity by delivering a roadmap for digital transformation and the adoption of innovative AI tools like ChatGPT. This helps businesses boost productivity while reducing costs. Consequently, we expect Microsoft's solutions to remain resilient even in a challenging macroeconomic environment, supporting low double-digit intrinsic value growth over our investment horizon.

BSD Analysis:
Microsoft delivered strong fundamentals with $300 billion in remaining performance obligations growing 36% year-over-year and healthy 21% cloud revenue growth, though Azure's 31% growth disappointed at the low end of expectations. The company faces a slowdown in non-AI Azure growth, with guidance of 31-32% for the March quarter reflecting this trend. Despite near-term headwinds, Mar Vista remains bullish on Microsoft's positioning for the digital transformation and AI adoption cycle. The company's comprehensive cloud portfolio spanning IaaS, PaaS, and SaaS makes it a mission-critical IT provider across industries. Microsoft's integration of AI tools like ChatGPT into its platform creates productivity gains and cost reductions for enterprise customers. The fund believes this value proposition will drive market share gains as organizations pivot to digital-first strategies. Mar Vista expects Microsoft's diversified cloud platform and AI capabilities to prove resilient in challenging macro environments, supporting low double-digit intrinsic value growth over their investment horizon.

Pitch Summary:
Salesforce's (CRM) stock came under pressure in Q1 as investors grew concerned about the potential negative impact of trade tensions and tariffs on the global economy, as well as the current lack of monetization from AI-enabled software solutions. Despite these concerns, we remain confident in Salesforce's strong competitive position, deep customer relationships, and its ability to monetize AgentForce, its newly launched generative AI-enabled chatbot designed to automate customer service tasks and significantly reduce costs compared to traditional call center support solutions. As the largest provider of SaaS-based customer relationship management software globally, Salesforce possesses a vast repository of customer data. This data, when combined with generative AI solutions like AgentForce, can be mined for valuable insights and used to deliver enhanced customer outcomes. While AgentForce is still in its initial stages, it has already generated strong interest from both customers and global system integrators. Notably, Salesforce announced that approximately 5,000 customers are currently testing AgentForce, including around 3,000 paying customers. We continue to believe that Salesforce is well-positioned to monetize its AI offerings over time and expect the company to grow intrinsic value at a low double-digit rate.

BSD Analysis:
Salesforce faced pressure from trade tension concerns and skepticism about AI monetization, but Mar Vista remains confident in the company's competitive position and AI strategy. The fund highlights Salesforce's dominant position as the largest SaaS-based CRM provider globally, with deep customer relationships and vast data repositories. AgentForce, the company's generative AI chatbot for automating customer service, represents a significant cost reduction opportunity versus traditional call centers. Early traction is promising with 5,000 customers testing AgentForce, including 3,000 paying customers, demonstrating strong market interest from both customers and system integrators. Mar Vista believes Salesforce's combination of market-leading CRM platform and extensive customer data creates a powerful foundation for AI monetization. The fund expects the company to leverage its data advantage to deliver enhanced customer outcomes through AI-driven insights. Despite near-term headwinds, management projects low double-digit intrinsic value growth as AI offerings mature and gain broader adoption.

Pitch Summary:
Broadcom shares faced recent stock price pressure stemming from two key concerns: (1) uncertainty around potential tariffs and the impact on global growth, and (2) investor skepticism regarding the return profile of large-scale AI capex investments by hyperscalers. This skepticism has been amplified by the efficiency gains recently demonstrated by DeepSeek, an unknown Chinese software company, which developed a competitive large language model at a much lower cost. These efficiency gains stoked fears that hyperscalers may have overbuilt AI infrastructure. Broadcom maintains a strong competitive position in the custom AI ASIC market, as well as a disciplined capital allocation, most recently reflected in the VMWare acquisition. That deal is already delivering better-than-expected top-line growth and margin expansion. Broadcom is the leading provider of custom AI ASICs and has been steadily diversifying its customer base beyond its initial anchor client, Alphabet. Many hyperscalers are interested in developing custom ASICs, which are tailored to specific computing tasks, given their lower costs and attractive performance attributes relative to general-purpose GPUs from providers like NVIDIA. We did reduce our position earlier in the quarter at higher levels to reallocate capital toward a more favorable risk-reward opportunity.

BSD Analysis:
Broadcom faced pressure from tariff uncertainty and investor skepticism about AI capex returns, amplified by DeepSeek's efficient AI model raising overcapacity concerns. Despite these headwinds, Mar Vista highlights Broadcom's strong competitive position in custom AI ASICs and disciplined capital allocation exemplified by the VMware acquisition. The VMware deal is already exceeding expectations with better-than-expected revenue growth and margin expansion. Broadcom leads the custom AI ASIC market and has successfully diversified beyond its initial anchor client Alphabet. The company benefits from hyperscaler interest in custom ASICs, which offer lower costs and better performance than general-purpose GPUs for specific computing tasks. However, Mar Vista reduced their position at higher levels to reallocate capital to more attractive risk-reward opportunities. The fund maintains a positive view of Broadcom's competitive moat and execution capabilities despite near-term market concerns.

Pitch Summary:
We initiated a position in NVIDIA (NVDA) following a significant pullback in the stock. The decline was prompted by concerns stemming from the emergence of DeepSeek, an unknown Chinese AI software company, which unveiled a highly efficient large language model (LLM). DeepSeek's breakthrough raised investor fears that U.S. hyperscalers might reduce their capital expenditure plans due to a shift toward more resource-efficient AI models. This led to concerns over potential overcapacity in the AI infrastructure market, weighing heavily on NVDA's stock. As a result, NVDA shares declined nearly 30% from recent highs, presenting an attractive entry point. On our cost basis, NVDA was trading at approximately 25x expected 2025 earnings and 20x expected 2026 earnings, valuations we found compelling for a company projected to grow revenue and earnings by over 50% in calendar year 2025. We viewed this risk-reward profile as favorable, especially given NVIDIA's dominant position in powering the transition to accelerated computing architecture that powers the AI ecosystem. The AI market is still in its preliminary stages, characterized by fast-paced innovation, and evolving rapidly. While DeepSeek's advancement sparked a debate around capital efficiency, we believe it reinforces a broader trend we have seen in past technology cycles. Specifically, we view Jevons' paradox, where gains in efficiency lead to increased overall consumption, as highly relevant to AI. Supporting this view, U.S. hyperscalers increased their 2025 capital expenditure guidance during Q4 2024 earnings calls in January, despite being fully aware of DeepSeek's progress. Further, the integration of reasoning capabilities into leading LLMs, such as those used in ChatGPT, is significantly increasing computing intensity. Some experts estimate that inferencing models with reasoning can demand up to one hundred times more computing, reinforcing the idea that greater efficiency will not lessen, but rather increase, demand for NVIDIA's infrastructure. We remain mindful of the rapid evolution within the AI space from the emergence of more efficient models to the still-nascent monetization of AI software. Against this backdrop, we chose to initiate a focused position in NVDA while reducing exposure to other AI-related holdings. In our view, NVIDIA offers an attractive way to participate in the generative AI buildout, combining scale, technological leadership, and a healthy growth outlook.

BSD Analysis:
Mar Vista initiated a position in NVIDIA following a 30% decline from recent highs, triggered by concerns over DeepSeek's efficient AI model potentially reducing hyperscaler capex demand. The fund views the pullback as creating an attractive entry point at 25x 2025E and 20x 2026E earnings for a company expected to grow revenue and earnings over 50% in 2025. Management believes NVIDIA's dominant position in accelerated computing architecture for AI infrastructure remains intact despite efficiency concerns. They apply Jevons' paradox theory, arguing that AI efficiency gains will actually increase overall computing demand rather than reduce it. The thesis is supported by hyperscalers increasing 2025 capex guidance despite awareness of DeepSeek's progress, and the integration of reasoning capabilities requiring up to 100x more computing power. Mar Vista sees NVIDIA as the optimal way to participate in generative AI buildout given its scale, technological leadership, and growth outlook. The position represents a focused bet on AI infrastructure demand while reducing exposure to other AI-related holdings.

Pitch Summary:
Despite PepsiCo's stock trading at a modest discount to fair value, the absence of clear actions for immediate improvement in Frito-Lay's and carbonated soft drink (CSD) trends makes it challenging to foresee a narrowing of the valuation gap. While the business remains resilient, we recycled the capital into better opportunities within the portfolio. From a broader perspective, PepsiCo faces increasing fundamental pressures. The U.S. Department of Health's push for stricter regulations on artificial ingredients and carbonated soft drinks in schools adds to the already significant challenge posed by GLP-1-driven shifts in consumer behavior. While PepsiCo is better positioned than many peers to navigate the artificial ingredient issue, the lost beverage volume is unlikely to be recovered. This structural change creates a difficult financial outlook despite the company's strong brand portfolio. Our initial decision to trim our position a year ago at higher prices was based on these concerns, and today, the thesis appears even more challenging. While valuation and bearish sentiment provide some support, the main concern is intrinsic value growth. PepsiCo encounters challenges in reaching its ambitious 8-10% growth target over the next two years. These obstacles include the headwinds posed by GLP-1, regulatory risks, and the potential for product boycotts stemming from tariff-related tensions. The stock's value rose by 10% intra-quarter, partly due to the trend towards investing in defensive companies. Taking advantage of that staples' outperformance period, we decided to sell our investment.

BSD Analysis:
Mar Vista adopted a bearish stance on PepsiCo, completely liquidating the position due to structural headwinds and limited growth prospects. The manager identifies multiple challenges including GLP-1-driven consumer behavior shifts, regulatory pressures on artificial ingredients and school beverage sales, and potential tariff-related boycotts. Despite PepsiCo's resilient business model and strong brand portfolio, the company faces difficulty achieving its ambitious 8-10% growth target over the next two years. The lost beverage volume from regulatory changes and health trends is viewed as unlikely to be recovered, creating a challenging financial outlook. While the stock traded at a modest discount to fair value, the absence of clear improvement catalysts for Frito-Lay and carbonated soft drink trends limited upside potential. Mar Vista took advantage of defensive stock outperformance during the quarter to exit at favorable levels. The decision reflects concerns about intrinsic value growth rather than near-term valuation, emphasizing the structural nature of the challenges facing the business.

Pitch Summary:
We initiated a position in NVIDIA (NVDA) following a significant pullback in the stock. The decline was prompted by concerns stemming from the emergence of DeepSeek, an unknown Chinese AI software company, which unveiled a highly efficient large language model (LLM). DeepSeek's breakthrough raised investor fears that U.S. hyperscalers might reduce their capital expenditure plans due to a shift toward more resource-efficient AI models. This led to concerns over potential overcapacity in the AI infrastructure market, weighing heavily on NVDA's stock. As a result, NVDA shares declined nearly 30% from recent highs, presenting an attractive entry point. On our cost basis, NVDA was trading at approximately 25x expected 2025 earnings and 20x expected 2026 earnings, valuations we found compelling for a company projected to grow revenue and earnings by over 50% in calendar year 2025. We viewed this risk-reward profile as favorable, especially given NVIDIA's dominant position in powering the transition to accelerated computing architecture that powers the AI ecosystem. The AI market is still in its preliminary stages, characterized by fast-paced innovation, and evolving rapidly. While DeepSeek's advancement sparked a debate around capital efficiency, we believe it reinforces a broader trend we have seen in past technology cycles. Specifically, we view Jevons' paradox, where gains in efficiency lead to increased overall consumption, as highly relevant to AI. Supporting this view, U.S. hyperscalers increased their 2025 capital expenditure guidance during Q4 2024 earnings calls in January, despite being fully aware of DeepSeek's progress. Further, the integration of reasoning capabilities into leading LLMs, such as those used in ChatGPT, is significantly increasing computing intensity. Some experts estimate that inferencing models with reasoning can demand up to one hundred times more computing, reinforcing the idea that greater efficiency will not lessen, but rather increase, demand for NVIDIA's infrastructure. We remain mindful of the rapid evolution within the AI space from the emergence of more efficient models to the still-nascent monetization of AI software. Against this backdrop, we chose to initiate a focused position in NVDA while reducing exposure to other AI-related holdings such as Broadcom, Amphenol, and Oracle. In our view, NVIDIA offers an attractive way to participate in the generative AI buildout, combining scale, technological leadership, and a healthy growth outlook.

BSD Analysis:
Mar Vista initiated a position in NVIDIA following a significant pullback, viewing the DeepSeek-driven decline as an attractive entry opportunity. The manager emphasizes compelling valuations of 25x 2025 earnings and 20x 2026 earnings for a company projected to grow revenue and earnings over 50% in 2025. The thesis centers on NVIDIA's dominant position in accelerated computing architecture powering the AI ecosystem. Mar Vista applies Jevons' paradox to AI, arguing that efficiency gains will increase rather than decrease overall computing demand. The integration of reasoning capabilities into LLMs significantly increases computing intensity, with some models requiring 100x more computing power. Hyperscaler capex guidance increases despite DeepSeek awareness support the continued infrastructure demand thesis. The AI market remains in early stages with rapid innovation and evolving monetization models. NVIDIA's combination of scale, technological leadership, and growth outlook provides attractive exposure to the generative AI buildout. The focused position approach while reducing other AI holdings demonstrates conviction in NVIDIA's competitive positioning.